OFAC Eases Sanctions Against Iran, But Restrictions Remain in Place for U.S. Companies

As most U.S. companies are aware, on January 16, 2016, “Implementation Day” of the Joint Comprehensive Plan of Action (JCPOA), the United States lifted several prohibitions on doing business with Iran. These include the removal of secondary sanctions against non-U.S. companies and the lifting of restrictions on foreign subsidiaries of U.S. companies doing business with Iran. However, it is important to remember that key sanctions remain in place against Iran and that these continue to broadly prohibit U.S. persons from doing business with Iran.

In particular, the U.S. trade embargo imposed on Iran and implemented pursuant to the Iranian Transactions and Sanctions Regulations (ITSR) remains in full effect, as do the accompanying export controls imposed on exports and reexports to Iran under the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR). In addition, blocking sanctions against several designated entities and individuals, including the Government of Iran, remain in place.

Primary U.S. Sanctions and Export Controls Remain in Place.

The U.S. trade embargo on Iran remains in place, which means that even after Implementation Day, U.S. persons continue to be broadly prohibited from engaging in transactions directly or indirectly with Iran or the Government of Iran.

The exportation or reexportation of goods, technology, or services by a U.S. person or from the United States to Iran or the Government of Iran continues to be prohibited.

Non-U.S. persons are prohibited from reexporting items that contain 10 percent or more U.S.-controlled content with knowledge or reason to know that the reexportation is specifically intended for Iran or the Government of Iran.

Non-U.S. persons continue to be prohibited from knowingly engaging in activities that seek to evade the prohibitions on transactions with Iran or that cause the export of goods or services from the United States to Iran.

Blocking Sanctions Remain in Place.

Blocking sanctions remain in place with respect to entities and individuals designated pursuant to authorities relating to support for terrorism; Iran’s human rights abuses; proliferation of weapons of mass destruction; destabilizing activities and human rights abuses in Syria and Yemen; diversion of goods intended for the people of Iran; officials, agents, and affiliates of the Iranian Revolutionary Guard Corps (IRGC); and foreign sanctions evaders, among others. These sanctions specifically target the Government of Iran, Iranian Financial Institutions, and Islamic Republic of Iran Broadcasting among other entities.

Secondary Sanctions That Involve Iran-Related SDNsRemain in Place.

Secondary sanctions continue to apply to non-U.S. persons (primarily foreign financial institutions) who knowingly facilitate significant financial transactions with or provide material or certain other support to Iran-related SDNs. Whether a financial transaction is “significant” continues to be determined by the criteria enumerated under section 561.404 of the Iranian Financials Sanctions Regulations (IFSR). Such criteria include, but are not limited to, the size, number, and frequency of transactions; the nature of the transactions; the level of awareness of the transaction by individuals at the relevant financial institution; the nexus between the financial institution performing the transaction and the blocked person; and the overall impact of the transaction on the objectives of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA).

Certain Menu-Based Secondary Sanctions Remain in Place.

After Implementation Day, menu-based sanctions (e., certain sanctions that the United States may impose in response to specified conduct) continue to apply to the following persons:

Persons who materially assist, sponsor, or provide support for (1) the IRGC or agents, officials, or affiliates thereof; (2) persons who engage in significant transactions with the IRGC; and (3) persons subject to financial sanctions under United Nations Security Council Resolutions that impose sanctions with respect to Iran;

Non-U.S. persons who engage in certain transactions involving the energy, shipping, and shipbuilding sectors of Iran, or the provision of underwriting, insurance, or reinsurance, if the transactions involve SDNs;

Non-U.S. persons who sell, supply, or transfer directly or indirectly to or from Iran graphite, raw or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes will continue to be subject to U.S. sanctions if certain enumerated criteria are met.

Non-Proliferation Sanctions Remain in Place.

Sanctions under the Iran, North Korea and Syria Nonproliferation Act related to the acquisition of nuclear-related commodities and services for nuclear activities, and other related non-proliferation sanctions remain in place. The United States will seek legislative changes to these sanctions, as appropriate, on Transition Day.

Iran Remains a State Sponsor of Terrorism.

Even after Implementation Day, Iran remains designated as a state sponsor of terrorism. Accordingly, there remain in place several restrictions related to this designation, including but not limited to (1) a ban on the export and sale of defense items to Iran; (2) restrictions on exports of certain sensitive technology and dual-use items; (3) restrictions on foreign assistance; and (4) certain financial restrictions.

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